University of Virginia and ImpactX collaborated to create a simple, standardized way to compare NGOs under the same SDG across the board, with a focus on Clean Water and Sanitation. For this research, our team used the metrics most important to investors as a way to enable comparison from NGO to NGO. The methodology was tested by researching 5 NGOs in the clean water and sanitation field. The research provides a holistic view of an NGO’s finances, as well as a breakdown of their revenues, expenditures, and a pie chart mapping the percentage of each category of expenditure: administrative costs, program costs, fundraising costs, and salary costs (if applicable). There is consistency in each large category (pollution, wastewater, education, etc), as well as smaller categories. This categorization will allow ImpactX to compare outputs in terms of metric category across different NGOs.

A metric tracing spreadsheet was put in place in order to show NGO spending data with the goal for ImpactX to efficiently create financial benchmarks for each metric category in terms of dollars spent. The ability to measure financial efficacy in the same metric category allows complete financial transparency between NGO competitors who commonly focus their work. To quantify metrics in terms of the dollars invested each year, ImpactX has to first collect a lot of data and find a way to evaluate impact efficiency without the missing piece which is the benchmark of average dollars spent per metric. In the future, benchmarks that establish metric output as a dollar ratio will be the gold standard in the impact investment space for investors.

It’s important to work with the information available, primarily through collecting the data available in the 990 forms. This will then allow ImpactX to sort NGOs based on their reported metrics and will evaluate their outputs in comparison to one another. This approach is scalable to other industries, as it does not tie itself to the metrics as a means to create spending benchmarks. Instead, investors can evaluate NGO efficiency based on their self-reported metric outputs. The search costs for finding the dollar-metric spending from each NGO are too high, due to a lack of reporting of these statistics, or an unwillingness from NGOs to be transparent with data. As a result, it is not currently possible to compare each NGO in terms of financial efficiency within each metric category. Currently, there is no widely available data within the impact investing space to be able to make comparisons between the financial efficacy of different metric categories. However, we are able to look at metric outputs from NGOs as a whole, and compare them to other NGOs.

When it comes to information gathering and reporting, ImpactX can save time. The main barrier to creating a functional, operating and scalable measurement system and a subsequent template is the extremely high search costs for this kind of information. Goals of scalability and depth are mutually exclusive. ImpactX needs to find a way to rectify this conflict between the measurement systems' scalability, and the ability of the system to accurately report on the massive amount of nuances within each individual industry. ImpactX can put the information-gathering process back into the hands of the NGOs. Without specific data as to how each of the NGOs performs in comparison to other NGOs with work in the same metric category, it will be extremely difficult to produce a measurement system that compares their efficacies. ImpactX can gather that data by putting it as a requirement in their scoring system. Having this data is the only means of comparing financial efficiency at the metric level.

The proposed approach gives impact investors the flexibility to choose what NGOs they want to compare, as well as what metrics they wish to compare between these organizations. By adding this “filter” option to the existing ImpactX website, investors will have the ability to search for particular metrics and narrow down comparable NGOs based on that particular metric criteria. For a proper comparison, NGOs will have a similar financial profile as well as a focus on the given metric. The optimal way to gauge if the NGO has a focus on the metric is by looking at the self-reported impact of those expenditures. Without specific cost-per-metric data, the only way we can make strong comparisons is by the metric category and letting potential investors decide which reported output they feel is up to their own standards.

Focusing the evaluation on the output of the organization in a holistic sense has three advantages: 1) it removes the necessity to deep-dive into each specific NGO and discover their spending in each metric category, 2) it allows for greater nuances for each NGO to defend their outputs, as some metrics may have subtle differences. This approach moves us away from a strict dollar-metric interpretation to allow for industry-specific nuances. Finally, 3) is this approach’s scalability. As ImpactX gathers information in each SDG category, it will be able to create categorizations for the entire SDG. This approach recognizes that each metric may carry nuances, but does not seek to delve into minute details that may not carry significant importance to potential investors.

The proposed holistic approach in developing a scalable methodology to measure impact across various types of endeavors ultimately boils down to flexibility and consistency. It is important to recognize the importance of NGOs being related in order for a proper comparison to take place. By comparing similar organizations, investors can get an idea of how to quantify impact by taking into account the revenue, expenditures, and specific metrics associated with various NGOs. It is vital to draw conclusions from these comparisons only when there is consistency across the board between the contrasting NGOs. As an incentive for NGOs to report their metric spending in the varying metric categories to the ImpactX website, organizations will be advertised to potential impact investors. In other words, the ImpactX website will serve as a platform for these NGOs to acquire attention from potential investors. Submitting their financial data across metric categories will increase the chance for investors to view their organization as they compare different NGOs based on reported metrics and spending patterns.